Online Installment Loans: Are They Right for You?

Benefits of Installment Loans

Often people wonder if installment loans are good or bad. The truth is, no loans are inherently good or bad. Whether they turn out helpful or damaging would depend on a bunch of factors like - your credit, financial condition, the flow of income, borrowing needs, how confident you are about monthly cash inflow, etc.

With that said, here are some of the benefits of Online Installment Loans -

1. Flexible, Easy-To-Manage Monthly Payments

With the majority of payday loans, the payment is often due in full on the next due date. No exceptions, whatsoever. This type of rigid structure can put a financial strain on the mind of the borrower. This is where online installment loans come in. They are easy to manage because monthly payments are small.

You’re not repaying the total loan amount with interest and fee in one single go. Rather, you are paying for a long period via smaller payments with easy monthly scheduling.

A long-term payment schedule works out for most people because it makes the payments more manageable. The added convenience of payments being smaller leaves you with enough finances to cover your monthly bills. On top of that, absence of collateral and penalty charges gives you added peace of mind.

2. Higher Loan Amount

Because the monthly payments span across a long period, lenders are usually ready to give you a higher amount for loans. This makes it good for situations where some unexpected urgent expense has come or you need the funds to cover for a costly emergency. The fact that you can take out one big loan avoids the need to apply for multiple small loans which are often hard to manage and keep track of.

3. Simple/Convenient Application Process

This is easily one of the strongest USPs of the online installment loans. It’s the convenience factor. If you go the traditional route when applying for a loan where you physically visit the bank, the whole process could take a LOT of time. Sometimes, it takes a few weeks to be done with the process.

This is not an ideal situation when you are particularly dealing with an emergency and need the money for it. Sometimes, the person finds out after a week that the application has been denied.

The online application takes out such pain. The process is simple and quick. Within a couple of minutes, you can fill out the application. You can do it 24/7. No time constraint and no need to wait for office hours. No need of making prior appointments during fixed time slots either.

4. Speedy Deposit Into Bank Account

It’s not just that the application process is quick. It’s also that the cash amount is generally deposited as immediately as the next working day after you’ve applied for it. This type of speedy allowance gives you the freedom and ease of procuring funds for necessary and immediate expenses. You can then gradually start repaying the loan over a long period in a budget-friendly way while also managing your monthly expenditure.

Most direct lenders today give people the option to get online installment loans.

What to Look for in an Installment Loan?

The Interest Rate

This is the first thing you should be looking for when searching and applying for an online installment loan. See if you’re getting a variable or fixed rate. Sometimes with the variable option, you can get a low rate initially. But, there’s always a possibility of it going up over time. The variable-rate model is good for people who plan on repaying their loans quickly. In that case, the interest rate will actually help you save money. But, if you’re going in for several years, stick with a fixed interest rate.

Check the Origination Fee

Next, you need to check if there’s an origination fee and how much. Usually, lenders charge an origination fee which is a set percentage of the total loan amount you’re applying for. Ideally, you should seek lenders that do not charge any money (especially if you’re taking out a big loan). If you can’t find a lender like that, try to at least find the lowest possible fee; one that sounds reasonable.

Term Length

Finally, consider the term length. Generally you may pay more interest if the term is longer. But, with a longer payment schedule, the payments are also lower. If your top priority is monthly cash flow, go long-term. If your goal is to save money overall, a short-term plan makes more sense.

Is an Installment Loan Right For You?

Online Installment Loans are good for you if you are confident about the duration in which you will be able to effortlessly pay off the loan. Besides, since the monthly installments are fixed and predictable, you can easily budget for it.

But, if you are unsure of how long it will take for you to pay off the loan and if you don't have a steady inflow of cash that could easily cover the installments as well as monthly expenses; avoid them.

The one area where these loans lack is - flexibility. After disbursement of loan, you can’t borrow any more money via installment loans. So, if you're unsure of how much money you might need in the future, a ‘line of credit’ might be a better option for you.